Power play over new media age

The megamedia spat between Time Warner and Disney may have left more than 3 million Americans without their nightly regimen of "Who Wants to be a Millionaire."

But, in reality, the battle between the TV titans is about far more than ratings and Regis Philbin. It frames a fundamental issue that will eventually seep into every living room in America: Who will control the media of the future as the digital revolution transforms televisions into interactive entertainment centers?

The dispute also displays the shift of power away from the once-dominant television networks to the cable industry in the world of deregulated telecommunications. After Congress opened up the industry in 1996, competition was supposed to reign, bringing consumers lower-cost, better-quality services.

Instead, critics contend, cable prices have skyrocketed and companies merged, giving fewer, bigger corporations control over access to Americans' eyeballs. The result: The consumer has been the loser, and some media critics believe this latest scrap between Time Warner and Disney could prompt Congress to look at whether to reregulate the industry.

"This increases the risk that the political system will step in and say, 'We can't allow these elephants to go stomping on the public interest,' " says Ken Auletta, media critic for The New Yorker. "If they can have this battle and shut out a powerful company like Disney, what are they going to do to other companies? Who's going to protect the public here?"

New York Mayor Rudolph Giuliani, whose city is among those going without ABC, says, "this is an example of what happens when you let a monopoly get too big."

Consumer groups have called on the Federal Communications Commission to step in, not only to resolve the issue in the short term, but also to create a policy called "open access," which would require cable companies to treat all their competitors equally.

One of Disney's top concerns is that Time Warner, which also owns CNN, the WB, and cable channels, will give its own content priority over Disney's.

That concern rose to a near panic when Time Warner announced its merger with American Online earlier this year. That's because in the digital future of tomorrow, cable is expected to be the primary way Americans get their TV, as well as their Internet access. And the company that controls the broadband cable lines controls the pipeline to the consumer.

"Disney's no fool. They understand a company like Time Warner AOL has the fate of their company in their hands," says Mr. Chester. "With a tiny flick of a switch, the Disney Channel or ESPN may travel a few seconds more slowly into the TV set of tomorrow, while the AOL Time Warner's Cartoon Network and the Sports Illustrated Channel is there instantaneously."

A policy of open access would forbid any such manipulation of broadband and perhaps head off such disputes in the future. The FCC said it may step in to ask for a cooling-off period, of sorts, as ABC has requested. But FCC spokesman David Fiske says, "We are not going to be involved in the underlying dispute."

That might mollify the 3.5 million homes in the Disney dark in the short run. But long term, it's the underlying dispute that could hurt both companies.

"The public has no sympathy for either one, and they are both going to get hurt," says Mr. Auletta. "They see it as two giant elephants warring, and no one has cited a principle at stake - it's just about money."

Everette Dennis, professor of media management at Fordham University in New York, says "the tremendous power of embarrassment" may have more power than any FCC involvement.

Nonetheless, both Time Warner and Disney insist they're the ones trying to protect the public interest. And the rhetoric on each side has been fierce.

When Time Warner pulled the plug on Disney's programming at 12:01 Monday morning in major markets from New York to Los Angeles, it contended the problem was the Mickey Mouse network's greedy demand for an additional $300 million in revenues. That, said indignant Time Warner executives, was "extortion" that would cost their customers money.

Disney shot back, charging that contention was a "lie," and accused the cable giant of monopolistic manipulation. It contends it was asking "fair market" value and a guarantee that its programming, from ABC to its new Toons Channel, will be treated the same as Time Warner's content.

The stakes for both companies are high. Disney's ABC is currently the top-rated network. And this is sweeps month, when the Nielsen raters tabulate Americans' viewing habits - which determine advertising rates. While the blacked-out homes represent only a small percentage of the nation's 100 million homes with televisions, they're concentrated in major markets.

But many observers believe Time Warner has more at risk than Disney. Its negotiating power-play comes as Congress and federal regulators are pondering whether to approve its merger with AOL - which would create a whopper of a megamedia company, with control over content, delivery systems, and the interactive future.

"Time Warner has said, 'We will assure open access to the Internet, we will not be the gatekeeper,' " says Auletta. "Well, Disney is accusing them of being a gatekeeper here, and if they can do it with TV signals, what are they going to do with the Internet? This really raises the stakes and is dangerous."